Answer:
Instructions are below.
Explanation:
Giving the following information:
Operating income= $40,000.
Selling price per unit is $100
Contribution margin ratio= 0.20
Fixed expense is $160,000
First, we need to calculate the unitary variable cost. We can use the contribution margin ratio formula:
contribution margin ratio= (selling price - unitary variable cost) / selling price
0.2 = (100 - unitary variable cost) / 100
unitary variable cost= 80
Now, the contribution margin:
Contribution margin= 100 - 80= $20
Finally, the number of units being sold:
Total contribution margin= operating income + fixed costs
Total contribution margin= 40,000 + 160,000= 200,000
Unitary contribution margin= Total contribution margin/number of units
20= 200,000 / number of units
number of units= 200,000/20
number of units= 10,000 units
